Buyout shadow over Marks

WH SMITH now looks as if it may join the hasty exodus of many of Britain's famous High Street names from the stock market. Permira, which lost out in the battle for the far more attractive prize of Debenhams, once again finds itself in the driving seat.

The inevitable question now is who next? Much of the weekend speculation focused on Britain's flagship retailer Marks & Spencer.

After the disastrous fourth-quarter sales figures, which startled the investment community, there has been much speculation as to where M&S goes next.

The critics have chosen to make chairman Luc Vandevelde the main target.

But it is worth pointing out that when he was chairman and chief executive, there was huge pressure on him to step back from his executive role and let his chosen successors Roger Holmes and Vittorio Radice take on the future strategy.

So far it has failed to pay off. But Vandevelde does not believe that one bad set of sales numbers means that the recovery is over.

Every season is a new start and Vandevelde takes the view that his successors have not yet been given the chance to show what they can do.

He believes that the amount of talent below board level - in womenswear, food and men's clothing - will yet show strength in depth.

Vandevelde has tied his own fortunes directly to the company by being paid in M&S shares. The concern has been that all his other activities are a distraction.

Vandevelde considers that in most of them, including the role of his buyout firm Change Capital in Robert Dyas and Vendex in Holland, he is an investor, not a manager. So there is no conflict with his M&S role.

Could there ever be a private equity buyout at M&S? In the City you never say never.

Vandevelde recognises that if the share price fell too far, the private equity companies would sniff around but the £7bn to £10bn needed to take M&S out would be too large for even the most ambitious of them.

He also believes that many of the changes made when M&S went through its capital reorganisation some two years ago, including exploitation of property assets, would make a take-out less attractive.

In many ways he believes that M&S needs to remain in the public arena. It has a relationship with its customers, many of whom have been shareholders over the years.

But in the end the choice will not be with M&S but with its key investors. No wonder Luc is spending a great deal of time cultivating the bigger shareholders like Brandes, Capital Group and Legal & General, to keep them friendly.

The difficulty he faces is that sniping from the smaller owners - who can make just as much noise - may undermine his efforts to keep the critics at bay.

Unanswered questions

WILL Shell ever learn? The latest effort at full disclosure and transparency leaves many questions still unanswered. If the company really wanted to impress on its openness, it would have released all 463 pages of the excoriating report into its missing reserves, not just a 15-page summary.

If Lords Penrose or Hutton had tried to get away with this dodge, they would have been strung up from the nearest Westminster lamp-post.

One had hoped that the arrival at the top of the distinguished geologist Lord Oxburgh, with none of the burdens of being a Shell man, would have led to a real cleansing inside the firm. Instead, there is a distinct feeling that the wagons are being circled.

Judy Boynton, the outsider brought in to help reform the Shell culture, has been ditched. But it would be appalling if this were seen as a green light to return to internal appointments. Fresh blood is needed, from the chairman down.

At one point during the latest proceedings (see opposite page) Lord Oxburgh was at pains to say why Shell was not Enron. But no one at Shell can deny that there was a cataclysmic failure of accountability which delivered enormous damage to its reputation and even its credit rating. The company yet faces humiliation at the hands of American courts, which do not take kindly to powerful firms which seek to hide their shortcomings from investors.

Fund choice

THE prospect of a long-drawn-out battle over who will be the next managing director of the International Monetary Fund looks to have been avoided. The combination of European and Latin American support for former Spanish finance minister Rodrigo Rato makes him a shoe in.

The hope must be that a powerful political operator will be better able to steer the IMF through global disruptions than a monetary technician.